MINNEAPOLIS — G&K Services Inc. has reduced its North American workforce by approximately 340 positions and eliminated approximately 120 open positions. These steps further adjust the company’s cost structure in response to lower customer volumes and the expectation of continued weakness in near-term economic conditions, the company says.
“While decisions to eliminate jobs are difficult, we’ve taken additional actions to further streamline our operating costs,” says Richard Marcantonio, G&K’s chairman and chief executive officer. “As we’ve stated before, we continue to manage our cost structure, realign staffing and control nonrevenue-generating expenditures in advance of increasingly difficult economic conditions. Our strong balance sheet, cash flow and business model, combined with these additional proactive actions, strengthen our position during this economic downturn as we continue to execute our strategic plan to emerge an even stronger company when economic conditions improve.”
As a result of the workforce reduction, G&K Services anticipates annual savings of approximately $14 million. The company will realize partial savings in its fiscal 2009 third quarter due to reduced compensation costs, offset by severance and outplacement expenses. The company expects to realize the full positive quarterly savings beginning in its fiscal 2009 fourth quarter.
G&K Services reported revenue for its fiscal 2009 second quarter, which ended Dec. 27, 2008, of $241.8 million, compared to prior-year second-quarter revenue of $255.3 million. Second-quarter earnings per diluted share were $0.52 — in line with management expectations, the company says. Earnings per diluted share were $0.60 in the same period last year.
“Second-quarter earnings met expectations despite a significant acceleration in customer job losses during the quarter,” says Marcantonio. “Our earnings performance reflects the proactive actions we’ve been taking to align our cost structure with current customer demand. We’ll continue to focus on factors within our control to maximize our productivity and generate strong cash flow, while also supporting growth initiatives to strengthen our performance.”